Kodak posts deeper loss than expected, shares fall

NEW YORK Thu Apr 28, 2011 2:21pm EDT

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NEW YORK (Reuters)- Eastman Kodak EK.N posted a larger-than-expected quarterly loss as it made less money from licensing its technology, sending its shares down 10 percent.

The photography company said on Thursday that film business revenue declined by 14 percent to $367 million. Kodak said part of the decrease was due to a hike in raw material costs, particularly in silver, which is used to manufacture film.

Kodak's executives declined to say how much the run up in silver prices hurt earnings during the first quarter. In February, the company said that in 2010, every $1 change in the price of silver per troy ounce impacted earnings by $10 million to $15 million.

Spot silver jumped on Thursday to an all-time high of $49.51 an ounce. It has gained nearly 60 percent so far this year.

For now, Chief Executive Antonio Perez said that Kodak is maintaining its strategy in managing higher silver prices.

"We are indexing our contracts, we are hedging, and we are moving as fast as we can with the part of the portfolio that is not silver-dependent," Perez told analysts on a conference call.

If silver prices continue rising "at the same pace," Perez added, "it will be a different story."

Kodak's revenue numbers paled compared with last year when the company received a $550 million one-time payment as part of a licensing agreement. Many investors see Kodak's value in its lucrative portfolio of intellectual property. It has more than 1,000 patents in its trove, and in 2010, it made an estimated $630 million from its licenses, according to Argus Research.

But analysts have said this revenue from licenses is unpredictable, and the portfolio may eventually dwindle.

Kodak expects to generate $250 million to $350 million in revenue each year through 2013 from its licensing agreements. This excludes payments from a potential settlement from an ongoing patent case over electronic camera technology with Apple Inc (AAPL.O) and Research in Motion. RIM.TO

Some investors view this case as Kodak's next big opportunity for a major payment, and shares spiked 20 percent in late March when the U.S. International Trade Commission issued a ruling that appeared to fall in the company's favor. The ITC has said it would issue its final decision on the case on June 23.

Cross Research analyst Shannon Cross called Kodak's quarterly results disappointing and said she expects to see more restructuring plans made by the company. Kodak has incurred restructuring charges for more than a decade.

In 2003, Kodak embarked on a pricey restructuring plan intended to transform it into a company that makes products for digital photography and printers. It suspended its dividend and slashed more than 70 percent of its employee base to 18,800.

The company said on Thursday that its adjusted first-quarter loss from continuing operations was $304 million or $1.13 a share, compared with a year-earlier profit of $240 million or 74 cents per share. The $1.13 per share loss compares with the analysts' average estimate of a loss of 61 cents compiled by Thomson Reuters I/B/E/S.

Revenue fell 31 percent to $1.32 billion, which falls short of the $1.37 billion analysts were expecting.

Shares of Kodak were down 31 cents or 9.8 percent at $2.86 on the New York Stock Exchange on Thursday afternoon.

(Reporting by Liana B. Baker; Editing by Derek Caney, Lisa Von Ahn and Matthew Lewis)

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